Looking for a Cyprus Based Broker? Learn About CySEC-Regulated Brokers.
Cyprus has become a very popular location for financial service companies, due in no small part to its low levels of taxation and easy entry requirements. There are actually more Forex brokers with a base in Cyprus than in any other jurisdiction. CySEC stands for the Cyprus Securities and Exchange Commission, which is the body charged with the regulation of financial services in Cyprus, and the popularity of this location means it’s definitely got its work cut out. Nevertheless, it manages to do a more than reasonable job, and we’ll give you all the pertinent details should you be looking to invest with one of the many CySEC Forex brokers.
A brief introduction to CySEC
When Cyprus became a European Union member country in 2004 CySEC became part of the European MiFID regulation. But CySEC was actually launched in 2001 with the following aims:
- To supervise and control the local stock exchange and related companies and brokerage firms
- To grant licences allowing investment and brokerage firms to operate, along with investment consultants in the local stock market and the Forex and CFD market
- To enforce, sanction and issue penalties to any that were found to be breaking the rules and regulations.
Before 2004, Cyprus-based Forex brokers were only authorised to operate in their own country, but following the entry of Cyprus into the EU they were able to expand their operations across all European countries. These Cyprus-based Forex brokers weren’t subject to the stringent requirements of other European regulatory bodies, but still qualified to operate freely in all EU member countries under MiFID.
CySEC introduced a number of guidelines to preserve investor confidence and protect the good nature of the Forex market.
CySEC Forex brokers have to follow certain guidelines.
We haven’t got enough room to give you all the specifics of the relevant guidelines, but we can give you a few examples.
- A CySEC Forex broker has to be licensed by CySEC as a Cypriot Investment firm.
- There must be at least two people in charge of the administration of the investment firm, and they have to be listed in the appropriate register.
- Once a CySEC licence has been issued a CySEC regulated broker is unable to expand its scope of services without notifying CySEC first. It is in a Forex broker’s best interest to include all the services it plans to offer when first applying for a licence.
- CySEC-regulated brokers also have certain financial requirements that have to be met regarding initial share capital, indemnity insurance, underwriting and operations.
Any Forex broker regulated by CySEC found not complying with these and any other requirements will be severely punished.
How to assess the standing of CySEC Forex brokers
CySEC has tried very hard to keep on top of brokerage operations, but Cyprus has nevertheless become a haven for scam brokerage firms. More recently, however, CySEC has upped its game and now comes down heavily on any offenders. One recent improvement has been the development of a register that lists all investment firms with a good reputation with CySEC, as well as those who are not faring so well.
The list is easily accessed via the website of CySEC. A number of details are included in the list for each CySEC-licensed Forex broker. These include the broker’s address, licence number, registration number, telephone, and fax numbers. Any Forex brokers regulated by CySEC are required to state their five-digit licence number on their website, and we would advise anyone considering a particular regulated broker to confirm the licence information through the official CySEC channels. We will, of course, be mentioning whether a broker is licensed and regulated by CySEC when sharing our Forex brokers reviews, but it is also advisable to check for yourself. If you find yourself confused in any way, then don’t hesitate to contact CySEC for more information or clarification.
CySEC has received a lot of bad press but things are improving.
There are a number of other regulatory bodies that will happily criticise the way in which CySEC works. This could be in relation to the non-compliance fines being on the small side, or the fact that a number of companies have escaped infringements with just a rap on their knuckles. We feel that a lot of the bad press is unjustified. After all, MiFID constantly oversees the operations of CySEC and ensures that regulatory guidelines are regularly updated and improved to bring any Cyprus-based firms into line with standard industry practices.
CySEC may still have a way to go to catch up with more reputable regulatory bodies such as the FCA in the UK, and the CFTC in the USA, but it is still one of the most popular bodies, and has managed to achieve a significant rate of growth. Many new Forex companies still prefer CySEC because it is still seen as relatively easy to become licensed with, and has far fewer formalities. Despite this, CySEC is still looking to improve its operations in the hope that it will be taken more seriously.
On a final note, there is one downside to choosing a CySEC regulated broker. Currently, there is no line of communication with regard to investor complaints. Unlike the NFA or CFTC, any complaints a trader might have will have to be directed to the broker. This means a lengthy wait while the broker considers the issue, and no real certainty it will be resolved. However, CySEC does advise clients to contact the Financial Ombudsman, or the court as a last resort, should they be unhappy with the broker’s decision. The Commission’s aim is to regulate financial markets and supervise the conduct of various financial organisations that operate out of Cyprus; but is not prepared to deal directly with any complaints or offer resolution or arbitration services. This is not a good thing, and isn’t doing CySEC any favours in the eyes of other regulatory bodies or investors; but hopefully, it will eventually change for the better.